Kansans should applaud the House Taxation Committee and its chair, Rep. Steven Johnson, R-Assaria, for their political backbone in making property taxes an option in addressing the legislature’s school finance dilemma.
The Kansas Supreme Court has ruled the current structure of school finance unconstitutional and ordered state lawmakers to fix it by early April. Some estimate that will cost as much as $600 million in new revenue.
State lawmakers enacted a uniform, statewide 32 mill levy for schools in 1992 that cut property taxes statewide by $260 million. That mill levy was reduced to its present level of 20 mills in 1997, further shrinking state-mandated property taxes for schools. A 10 mill increase would now generate roughly $320 million in new revenue, which represents a 7 percent increase in total property tax revenues statewide.
Sales or income tax options are nonstarters.
State and local sales tax rates are approaching thresholds that threaten competitiveness, particularly for the border counties of Kansas. Combined tax rates exceeding 10 percent and more are becoming common. State lawmakers have gone to the sales tax twice in the last five years, six times since 1986; and local officials are enacting and raising local sales taxes even more frequently.
Kansans are fatigued from seven years of income tax debate and want to give further discussion here a rest. Last year Johnson helped assemble a bipartisan coalition of lawmakers that ended the disastrous Gov. Sam Brownback experiment and partially restored rates to earlier levels. As a result of that, plus the boost occurring due to federal tax reform in December, individual income tax revenues are up by $270 million over estimates for the first eight months of the fiscal year. These likely revenues could become part of the answer on school finance as well.
On property taxes, business representatives lined up before the House Taxation Committee last week to denounce a bill that would raise the state mill levy for schools. Owners of business and commercial properties do bear a substantial portion of the property tax burden, currently 27 percent, but their share has declined over earlier highs. They benefited from state property tax cuts in 1992, 1997 and 1998, and voters granted them a special constitutional reduction in 1992.
Further, the Tax Foundation’s 2018 assessment of “business tax climate” ranks Kansas 19th lowest on property taxes among the 50 states, a significant improvement over Kansas’ ranking of 27th just three years ago.
Local officials cautiously but regularly tap into property taxes often with voter endorsement for a variety of local purposes, which suggests they view the property tax as well administered and fair. Apart from constitutional exemptions granted by voters, property taxes are levied based on property value, so the more one owns, the more one pays. Ninety-nine percent of all property tax revenues go to local governments and schools.
Except for the Brownback relapse, Kansas tax policy has sought balance and diversity in taxes in order to assure lower tax rates overall, reduce competition with other states and promote tax fairness. Economic growth, bolstered by recent upticks in income and sales tax revenues, will likely maintain this balance — even with an increase in the state mill-levy for schools.
Property taxes in Kansas are fair and not out of line with other states, and a state levy has not been raised for over 20 years. If new revenue is required for school finance, property taxes should be part of the solution.
— H. Edward Flentje is professor emeritus at Wichita State University and formerly served with Kansas Govs. Robert Bennett and Mike Hayden.